Recent Developments in Asset Management
Fiona Price and Carl Schwartz*
The global asset management industry has grown rapidly following the global financial crisis.
International standard-setting bodies and national regulators are working to better understand
and, if necessary, address potential financial stability risks from this industry. A particular concern
is that, in the event of a significant negative shock to current favourable conditions, some funds
may experience substantial redemptions, and so be forced to engage in asset ‘fire sales’ that
could be destabilising for the financial system. This article provides background on international
developments, as well as some Australian context.
Introduction
Asset managers invest funds on behalf of clients
through collective investment vehicles (‘investment
funds’) or separate accounts. Asset managers act as
agents rather than principals, providing investment
services to clients for a fee. The clients bear all credit,
market and liquidity risks and share any losses or gains
made by the investment fund or separate account.1 In
this sense, investments with asset managers differ from
deposits with banks which can be redeemed at par.
The asset management industry offers potential
benefits to financial stability by diversifying risks
across a large range of market participants and
providing an alternative to banks as a source of
funding for the real economy. However, asset
managers can also give rise to risks of their own:
the risks posed by leveraged hedge funds and
bank-like money market funds (MMFs) have been
demonstrated in past episodes internationally.2 A
particular concern in the current environment is
that if market conditions deteriorated sharply, some
funds may experience bank-like ‘runs’ and engage
in asset ‘fire sales’ that could be destabilising for the
financial system. This concern reflects strong growth
in the asset management industry in recent years as
investors search for yield, at the same time as liquidity
has declined in some markets due to banks reducing
their market-making activities in line with their lower
appetite for risk and tighter financial regulation. In
recent years, international standard-setting bodies
and national regulators have taken steps to enhance
monitoring and regulation to address the potential
for this industry to pose risks to financial stability.
Industry Characteristics
Size and growth
Asset managers are estimated to have had around
US$76 trillion in assets under management (AUM)
globally at the end of 2013 (Graph 1).3 While the
figures are not directly comparable, this is equivalent
to more than half of global banking assets.4 Total
global AUM more than doubled in size over the
past decade or so. In particular, growth has been
strong for North American asset managers (Graph 2)
* The authors are from Financial Stability Department.
1 For investment funds, clients are equity shareholders in the fund. For
separate accounts, a single institutional investor has direct ownership
of the assets in the separate account.
2 See Edwards (1999) for discussion on the collapse of Long-Term
Capital Management’s highly leveraged hedge fund and IOSCO
(2012a) for coverage of the events in the US MMF industry during the
global financial crisis.
3 This estimate, taken from IMF (2015), is based on the AUM of the
world’s top 500 asset managers at the end of 2013. However, it will
include double counting due to cross-investment among asset
managers.
4 Global banking system assets are the aggregate of banking system
assets in 20 jurisdictions plus the euro area (FSB 2014). Banking system
assets across jurisdictions are subject to definitional differences.
B U L L E TIN | J U N E Q UA R T E R 2 0 1 5
69
R EC ENT DEV ELOPM E N T S I N A S S E T M A N AG E M E N T
Graph 1
Global Assets under Management*
US$tr
Graph 3
Private Non-financial Corporations’
Debt Funding*
US$tr
March quarter 2009 = 100
index
60
60
40
40
20
20
US
150
Non-intermediated debt
100
2001
*
2004
2007
2010
2013
0
The assets under management of the world’s 500 largest asset
managers; includes cross-invested assets among asset managers
Graph 2
Across regions
North America
€tr
Europe*
45
45
30
30
15
15
Banking system assets**
¥tr
Japan
US$tr
Rest of world
1 500
45
Banking system
assets (excl China)**
1 000
30
Assets under management***
500
0
2003
2008
2013 2003
15
2008
2013
*
Europe includes the euro area, Switzerland and the United Kingdom
**
Banking system assets are subject to definitional differences
Sources: FSB; RBA; Towers Watson
and, more recently, among bond funds in a range
of jurisdictions. Growth in AUM in the post-crisis
period has been assisted by the low interest rate
environment, which has supported growth in asset
values and prompted investors to search for yield. At
the same time, regulatory reforms and balance sheet
repair by banks in some countries – both in response
to the crisis – have encouraged non-intermediated
debt funding (Graph 3).
R ES ERV E BA NK OF AUS T RA L I A
120
150
100
100
Intermediated debt
2011
2014
*
All currencies translated to home currencies
**
Public and private non-financial corporations
2011
2014
Concentration
Available data suggest that AUM in the asset
management industry are more concentrated than
assets in the banking industry, with nearly 20 per
cent of AUM managed by the five largest asset
managers at the end of 2013 compared with around
10 per cent of banking assets in the five largest banks
(Table 1). The data show that AUM of the largest asset
manager are bigger than assets of the largest banks
both in dollar terms and as a share of the industry.
0
*** The assets under management of the world’s 500 largest asset
managers; by manager domicile; includes cross-invested assets
among asset managers
70
index
UK
Sources: European Central Bank; Office for National Statistics; RBA;
Statistics Canada; Thomson Reuters
Bank and Asset Management Industries
US$tr
Canada
80
Sources: IMF; Towers Watson
120
100
index
0
index
Euro area**
Types of clients and funds
Clients of asset managers can either be retail investors
(individuals) or institutional investors (e.g. pension
funds, insurance companies, mutual funds and
hedge funds). Generally, around two-thirds to
three-quarters of asset managers’ client base by
value are institutional investors.5
Asset managers’ investment funds can either be
public or private, with public funds accessible to
both retail and institutional investors, and private
5 Around three-quarters of European asset managers’ client base were
institutional investors in 2014 (EFAMA 2014). In Australia, an estimated
two-thirds of AUM were sourced from institutional investors in
2009 (Australian Trade Commission 2010); this proportion has likely
increased more recently due to the 2013 and 2014 increases in the
superannuation guarantee boosting superannuation fund balances.
50
R E C E N T DE VE L O P ME N TS IN ASSE T MAN AGE ME N T
Table 1: Largest Asset Managers and Banks(a)
End December 2013
Asset manager
AUM
BlackRock
US$b
4 324
Vanguard Group
Allianz Group
State Street Global
Fidelity Investments
J.P. Morgan Chase & Co.
Bank of New York Mellon
AXA Group
Capital Group
BNP Paribas
Top 10
2 753
2 393
2 345
2 160
1 602
1 583
1 532
1 339
1 325
21 355
Per cent of Bank
Assets Per cent of
total AUM
total assets
Per cent
US$b
Per cent
5.7 Industrial and Commercial 3 125
2.2
Bank of China
3.6 HSBC Holdings
2 671
1.9
3.1 China Construction Bank
2 538
1.8
3.1 BNP Paribas
2 495
1.8
2.8 Mitsubishi UFJ Financial
2 489
1.8
2.1 J.P. Morgan Chase & Co.
2 416
1.7
2.1 Agricultural Bank of China 2 405
1.7
2.0 Bank of China
2 292
1.6
1.8 Barclays
2 225
1.6
1.7 Deutsche Bank
2 220
1.6
27.9 Top 10
24 875
17.9
(a)Since some asset managers’ funds will be institutional investors in the funds of other asset managers, there will likely be double
counting in the AUM
Sources: FSB; RBA; SNL Financial; Towers Watson
funds (and separate accounts) only accessible to
institutional investors. Investment funds are generally
open-ended, closed-ended or exchange-traded.
••
Open-ended funds allow investors to redeem
their shares directly from the fund on a
continuous or periodic basis (e.g. daily, monthly
or quarterly). Many open-ended funds offer daily
liquidity (IMF 2015). The number of a fund’s shares
varies over time and the share price is generally
determined by the fund’s net asset value (NAV).
••
Closed-ended funds have a fixed number of
shares that are traded among investors on stock
exchanges. The share price is determined by
demand and supply rather than the fund’s NAV.
••
Exchange-traded
funds
(ETFs)
have
characteristics of both open-ended and
closed-ended funds, though they are typically
referred to as open-ended funds.6 The number
of an ETF’s shares can vary over time. The
ETF’s shares are traded between the ETF and
authorised participants (usually broker-dealers)
in the primary market. Authorised participants
6 ‘Box A: How Do ETFs Work?’ in Kosev and Williams (2011) provides
more information on the structure of ETFs.
can trade these shares with investors in the
secondary market, and these shares can then
be traded among investors on stock exchanges.
Authorised participants can engage in arbitrage
trading, which usually results in the ETF’s share
price being close to the fund’s NAV.
Pension funds and funds of life insurance corporations
perform similar functions to investment funds,
though these funds have a long-term liability to
pay the beneficiaries (i.e. pension and life insurance
claims). While this feature lowers redemption risk,
these funds could still pose financial stability risks
through channels such as asset fire sales or their
interconnections with other financial institutions
(CGFS 2011).
Investment strategies
Open-ended mutual funds (excluding MMFs) are the
largest type of fund and are estimated to have held
41 per cent of total global AUM at the end of 2013
(IMF 2015). These funds generally invest in either
bonds, equities, or a mixture of bonds and equities;
within this type of fund, equity funds hold the largest
share of AUM (Graph 4). Separate accounts, which
B U L L E TIN | J U N E Q UA R T E R 2 0 1 5
71
R EC ENT DEV ELOPM E N T S I N A S S E T M A N AG E M E N T
manage the cash of single institutional investors, are
not shown in Graph 4. These accounts are estimated
to have held 36 per cent of total global AUM at the
end of 2013 (IMF 2015). Less is known about their
asset allocation since their investment strategies vary
depending on the client’s mandate. However, the
Securities Industry and Financial Markets Association
notes that the large separate accounts managed by
surveyed asset managers have limited leverage and
limited holdings of illiquid securities (SIFMA 2014).
Graph 4
Global Assets Under Management
By collective investment vehicle type
US$tr
Open-ended mutual funds
High-yield bond*
Other bond
Equity
30
Mixed
Other
US$tr
Other funds
Exchange-traded funds
Money market funds
Alternative funds**
30
20
20
10
10
0
2009
*
**
2013
2009
2013
0
Includes advanced economy high-yield bond funds and emerging
market bond funds
Includes private equity funds and hedge funds
Sources: IMF; Investment Company Institute; RBA
In recent years, the AUM of funds investing in less
liquid asset classes and pursuing more complex
investment strategies has increased, which is likely
to reflect investors’ search for yield. At the same time,
banks have reduced their market-making activities
in less liquid markets due to regulatory reforms and
their decreased risk appetite, which has contributed
to reduced liquidity in these markets (CGFS 2014;
Cheshire 2015). However, the strong investor
demand for less liquid assets may have masked any
structural decline in liquidity, so market participants
might be overestimating liquidity. According to
CGFS (2014), there is little evidence to suggest that
asset managers have adjusted their investment
funds’ liquidity buffers or redemption terms to reflect
any changes in the liquidity risks associated with
their bond holdings.
72
R ES ERV E BA NK OF AUS T RA L I A
Asset Management and
Systemic Risk
Asset managers and their funds may have certain
characteristics or engage in activities that create
or amplify risk. They often undertake maturity and
liquidity transformation, sometimes with leverage.
Relative to banks, the financial stability concern is
less about whether these characteristics or activities
result in significant losses, since a broad range of
clients will share these losses among themselves and,
unlike claims on a bank, clients should be prepared
to accept losses on their investment fund claims.
Rather, the focus is on whether asset managers and
their funds can spread distress to other parts of the
financial system and to the real economy through
the behaviour of asset managers and their clients.
The literature tends to focus on two main channels
through which asset managers or their funds could
transmit risk to the rest of the financial system: the
market channel and the counterparty channel (see,
for example, OFR (2013)).7
The market channel
Asset managers could potentially cause destabilising
falls in asset prices if forced to liquidate assets to meet
redemptions, particularly if this involves less liquid
asset positions. This could arise, for example, if a fund
or an asset manager faced an adverse shock that led
to a loss of confidence. Open-ended funds that offer
daily redemptions are susceptible to bank-like runs.8
If clients consider the fund to have insufficient
liquid assets to meet its future redemptions without
considerably affecting the fund’s NAV, they may
quickly try to redeem their funds. Depending on
7 In their methodologies for identifying non-bank non-insurer global
systemically important financial institutions, the FSB and IOSCO also
identified the substitutability transmission channel. This is where the
distress or failure of an asset manager or a fund that provides a critical
function or service could spread distress to market participants that
heavily rely on this function or service, particularly if there are limited
ready substitutes available in the market (FSB and IOSCO 2015).
8 ETFs are generally considered likely to have lower redemption risk
than open-ended funds that offer daily liquidity due to their structure.
IMF (2015) provides some discussion on redemption risk at ETFs.
R E C E N T DE VE L O P ME N TS IN ASSE T MAN AGE ME N T
the fund’s liquidity portfolio, run-like conditions
may force an asset fire sale and, depending on the
pace and scale of the ensuing price adjustment,
spread distress to other financial institutions holding
these assets or similar assets. Even in the absence of
run-like conditions, asset fire sales may still arise if a
highly leveraged fund becomes subject to margin
calls and liquidity constraints, or if asset managers
quickly ‘herd’ out of an asset class.
The counterparty channel
Risks can also be transmitted through large
exposures among asset managers and between asset
managers and other financial institutions. The asset
management industry has direct connections with
many other financial institutions, including those that
provide services to asset managers (e.g. broker-dealers
and banks) and those that serve as counterparties
for derivative contracts and portfolio investments
(e.g. banks and insurance companies). In the United
States, the Office of Financial Research (OFR) contends
that asset managers and their funds have become
increasingly connected to other financial institutions
over the past decade or so (OFR 2013).
Banks in particular provide a large range of services
to the asset management industry, including brokerdealer services, custodial services and the provision
of credit. Some of the services provided by banks
may involve asset managers giving collateral to
banks that can be used for the banks’ own purposes.
This is referred to as the re-use of collateral or the
rehypothecation of collateral.9 While this re-usable
collateral offers benefits to the financial system,
such as enhancing liquidity, it can also transmit
counterparty risks.
••
Collateral re-use can lead to the build-up of
leverage-like ‘collateral chains’ between banks
and asset managers, increasing the risk of
contagion (Singh 2011). Fischer (2015) notes that
9 FSB (2013a) defines the ‘re-use’ of collateral as any use of securities
delivered in one transaction in order to collateralise another
transaction and the ‘rehypothecation’ of collateral as the re-use
of client assets (i.e. where the intermediary has an obligation to
safeguard its client’s assets).
chains of interconnections based on marketvalued collateral are vulnerable to distress and
that longer chains of interconnections make
it difficult for firms within the chain to fully
understand their counterparty risks.
••
If an asset manager or its broker-dealer were to
experience distress, or an asset manager became
concerned about the extent to which its assets
had been rehypothecated, it might recall those
rehypothecated assets. The broker-dealer would
then have to return the equivalent amount of
securities provided by the asset manager, which
could put it into distress (FSB 2013a). If a brokerdealer were to fail, asset managers might have
limited access to their rehypothecated assets.
This could have implications for their fund’s
solvency if leverage has been obtained. For
example, Aragon and Strahan (2012) found that
hedge funds using Lehman Brothers as a brokerdealer were more likely to fail than otherwise
similar funds following the Lehman bankruptcy.
As well as through exposures to other financial
institutions, risks can also be transmitted through
intragroup exposures. Exposures among entities
within the same financial conglomerate increase
the risk of contagion (The Joint Forum 1999). Even
if the other entities within the group are relatively
isolated from a distressed entity, potential exists for
damage to that institution’s brand. More than half of
the largest 25 asset managers are owned by banks
or insurance companies (IMF 2015). In fact, Table 1
shows that some of the largest asset managers are in
the same conglomerate as the largest banks.
Recent International Regulatory
Developments
International standard-setting bodies, international
organisations and national regulators have taken
steps to enhance monitoring and regulation of
the asset management industry. This includes
the package of post-crisis reforms that address
‘shadow banking’ more generally and, more recently,
further work that builds on this in line with the
B U L L E TIN | J U N E Q UA R T E R 2 0 1 5
73
R EC ENT DEV ELOPM E N T S I N A S S E T M A N AG E M E N T
industry’s strong growth amid the low interest rate
environment. For example:
••
••
••
In response to the vulnerabilities in MMFs and the
gaps in their regulation exposed by the global
financial crisis, the International Organization of
Securities Commissions (IOSCO) released policy
recommendations for MMFs in 2012 (IOSCO
2012b). In the United States, the Securities and
Exchange Commission recently adopted major
changes to the regulation of its large MMF sector
(SEC 2014). Institutional prime MMFs, considered
to be the most susceptible to runs, are required
to more clearly differentiate their product from
bank deposits by floating their NAV rather than
setting it at ‘the buck’.10 All non-government
MMFs have been provided with new tools to
address the risk of runs, including liquidity fees
and the temporary suspension of redemptions.
In 2012 and 2013, IOSCO released principles
relating to liquidity risk management practices
in collective investment schemes, including
specific principles for the suspension of
redemptions and the valuation of assets (IOSCO
2012c; IOSCO 2013a; IOSCO 2013b).
The Financial Stability Board (FSB) issued its
policy framework for shadow banking entities
in 2013, which included policy tools designed
to mitigate risks posed by investment funds that
are susceptible to runs, such as those involved in
credit intermediation with maturity and liquidity
transformation and/or leverage (FSB 2013b).
These tools included: redemption gates; the
suspension of redemptions; redemption fees or
restrictions; side pockets;11 illiquid investment
limits; liquidity buffers; concentration limits;
leverage limits; and restrictions on the maturity
portfolio of assets.
10Institutional prime MMFs are only accessible to institutional investors
and invest primarily in commercial paper issued by financial
institutions. In the United States, these MMFs are now required to sell
and redeem their shares based on the current market-based value of
their underlying assets (i.e. have a floating NAV) rather than maintain
a stable NAV, which is generally set at US$1 (i.e. ‘the buck’).
11Side pockets are the legal separation of the impaired or illiquid
portion of a fund’s portfolio.
74
R ES ERV E BA NK OF AUS T RA L I A
••
An FSB and IOSCO workstream is continuing
to develop methodologies for identifying
non-bank non-insurer global systemically
important financial institutions. In its second
consultative document, this workstream
focused on developing separate methodologies
for investment funds and asset managers, as
activities undertaken at both the asset manager
and investment fund level were considered to
potentially pose systemic risks (FSB and IOSCO
2015).
••
In 2013, the OFR released a report commissioned
by the US Financial Stability Oversight Council
(FSOC) which included a discussion on the
potential financial stability risks posed by the
asset management industry (OFR 2013). And
in December 2014, the FSOC sought public
comments on the potential risks to US financial
stability from asset management products
and activities, particularly risks associated with
liquidity and redemptions, leverage, operational
functions and resolution (FSOC 2014).
••
In its April 2015 Global Financial Stability Report, the
International Monetary Fund suggested several
improvements for the oversight of the asset
management industry, including: enhancing
microprudential supervision; incorporating a
macroprudential perspective into the oversight
of the industry; improving liquidity regulations;
considering tools that effectively price-in the cost
of liquidity, including minimum redemption fees
since funds’ redemption fees have declined over
the past decade due to competitive pressures;
and accounting for the products and activities
of an asset manager or investment fund when
determining its systemic importance (IMF 2015).
••
The FSB is currently undertaking work focusing
on the potential financial stability risks posed by
current market liquidity issues, including those
associated with asset management activities,
as well as the potential longer-term financial
stability risks posed by asset management
activities (FSB 2015).
R E C E N T DE VE L O P ME N TS IN ASSE T MAN AGE ME N T
Australian Asset Management
Industry
The Australian asset management industry is
estimated to have had A$2.6 trillion AUM at the end
of March 2015 (Table 2). This is equivalent to around
3 per cent of global AUM and around 75 per cent
of the total financial assets of Australian authorised
deposit-taking institutions (ADIs). Superannuation
funds and funds of life insurance corporations
accounted for almost 70 per cent of total AUM, while
investment funds accounted for 12 per cent of total
AUM.12 The remaining AUM was sourced from funds
placed with investment managers by other domestic
institutions and overseas investors. The industry’s
AUM has more than doubled over the past decade,
largely driven by the strong growth in superannuation
fund balances. Conditions for the Australian asset
management industry are importantly linked to
global markets, given interlinkages between markets
and more direct exposures, including through funds
outsourced to global asset managers.
Superannuation funds are the largest sector of
the Australian managed funds industry and are
prudentially regulated and supervised by the
Australian Prudential Regulation Authority (APRA),
except for self-managed superannuation funds
(SMSFs), which are overseen by the Australian
Taxation Office. The FSB and IOSCO consider that
pension funds pose a low risk to global financial
stability (FSB and IOSCO 2015), and there are a
number of features also present in the Australian
superannuation industry to limit systemic risk.
Table 2: Australian Assets under Management(a)
End March 2015
Consolidated assets
Superannuation funds
Life insurance corporations(b)
Investment funds
of which:
– public unit trusts(c)
– cash management trusts(d)
All managed funds institutions
Other funds placed with investment
managers(e)
Total
Memo item:
– ADIs(f )
A$ billion
1 509
254
311
Share of total AUM
Per cent of total
consolidated assets
58
10
12
276
25
2 073
11
1
79
546
2 619
21
100
3 341
na
(a)Wholesale trusts are captured to the extent that managed funds institutions and other funds placed with investment managers are
invested in wholesale trusts; components may not add up due to rounding
(b)Includes superannuation funds held in statutory funds of life insurance corporations
(c)Public unit trusts are investment funds that are open to the general public and allow investors to either redeem their units directly
from the trust or dispose of their units on a secondary market
(d)Cash management trusts are broadly equivalent to MMFs in other advanced economies
(e)Includes the funds of other domestic institutions, such as government bodies and general insurers, and overseas investors
(f )At end December 2014; total financial assets of Australian banks and other depository corporations
Sources: ABS; RBA
12Superannuation funds outsource a large part of their asset
management, including ‘effective outsourcing’ to independent asset
managers and ‘nominal outsourcing’ to affiliated asset managers
(Liu and Arnold 2010).
B U L L E TIN | J U N E Q UA R T E R 2 0 1 5
75
R EC ENT DEV ELOPM E N T S I N A S S E T M A N AG E M E N T
••
Superannuation funds have lower liquidity
risk since superannuation is compulsory and
investors cannot access their superannuation
until they retire and reach the preservation age
(currently between 55 and 60 years old). Also,
there is limited evidence of switching between
funds, which is likely to be due to investor
disengagement (Industry Super Network 2010).
While some funds delayed processing switching
requests during the global financial crisis due to
insufficient liquid assets, there was no evidence
of large-scale switching between funds or
investment strategies.
••
The majority of superannuation funds’ liabilities
have little or no direct leverage.
••
Available data suggest a low degree of
concentration and interconnectedness among
superannuation funds.
••
The majority of superannuation fund assets
are held in defined contribution funds, which
potentially have less incentive to search for yield
compared with defined benefit funds since
they do not offer a guaranteed income stream
(Antolin, Schich and Yermo 2011).
That said, the superannuation industry’s relatively
large size warrants ongoing attention to potential
risks. Because they make similar investment decisions
and are exposed to common shocks, superannuation
funds could contribute to procyclicality. Also, these
funds and their (less-regulated) service providers are
highly interconnected and there is a high degree of
concentration among some of their service providers
(Donald et al 2014). While liquidity risk is currently
somewhat limited by the preservation rules and
investor disengagement, there is potential for it to
become more pronounced as a larger proportion of
fund members move from the contribution phase to
the drawdown phase.
In addition to the industry being mostly represented
by superannuation funds, other features of the
Australian asset management industry should serve to
lower systemic risk relative to the asset management
industries in other advanced economies.
76
R ES ERV E BA NK OF AUS T RA L I A
••
Under the Corporations Act 2001, retail funds are
required to suspend withdrawals if their ‘liquid
assets’ are less than 80 per cent of total assets,
limiting fire-sale pressure.13 This feature was
demonstrated during the financial crisis: many
mortgage funds suspended redemptions in the
face of increased redemption demand, limiting
the need to liquidate assets.14 While some
other advanced economies allow funds or the
regulator to suspend redemptions, a fund may
be reluctant to take this action without the legal
requirement and the regulator may not have
sufficient information to suspend redemptions
in a timely manner.
••
The hedge fund sector is relatively small. In a 2013
review, the Australian Securities and Investments
Commission (ASIC) found the sector to have low
levels of leverage and concluded that these
funds do not pose significant systemic risk to
the Australian financial system (ASIC 2013).
In recent years, ASIC has improved disclosure
requirements for hedge funds open to retail
investors.
Conclusion
While the asset management industry provides
benefits to the financial system and the real economy,
it also poses potential risks to financial stability. Since
the global financial crisis, international standardsetting bodies and national regulators have taken
steps to better understand and, where necessary,
address the risks posed by the asset management
industry. This includes steps taken in response to
the crisis to address ‘shadow banking’ activities, and
further attention in recent years in line with industry
growth associated with the rise in investors’ search
for yield. These efforts are ongoing.
13 Assets that are considered to be ‘liquid’ include cash, bills, marketable
securities, property of a prescribed kind or other property that the
responsible entity reasonably considers able to be realised for
its market value within the period provided for in the scheme’s
constitution for satisfying withdrawal requests. Under certain
conditions, a non-liquid fund can offer withdrawals out of available
cash or particular assets. For more information, see sections 601KA
and 601KB of Chapter 5C of the Corporations Act.
14Lowe (2015) discusses two episodes of redemption pressure on
Australian property-related trusts.
R E C E N T DE VE L O P ME N TS IN ASSE T MAN AGE ME N T
There are a number of features of the Australian asset
management industry that should serve to limit
systemic risk. Nonetheless, the Australian authorities
will continue to engage internationally and
domestically to better understand and, if appropriate,
address the risks posed by the industry. R
References
Antolin P, S Schich and J Yermo (2011), ‘The Economic
Impact of Protracted Low Interest Rates on Pension Funds
and Insurance Companies’, OECD Journal: Financial Market
Trends, 2011(1), pp 1–20.
Aragon G and P Strahan (2012), ‘Hedge Funds as Liquidity
Providers: Evidence from the Lehman bankruptcy’, Journal
of Financial Economics, 103(3), pp 570–587.
ASIC (Australian Securities and Investments
Commission) (2013), ‘The Australian Hedge Funds Sector
and Systemic Risk’, Report 370, September.
Australian Trade Commission (2010), ‘Investment
Management Industry in Australia’, June.
CGFS (Committee on the Global Financial System)
(2011), ‘Fixed Income Strategies of Insurance Companies
and Pension Funds’, CGFS Papers No 44.
CGFS (2014), ‘Market-making and Proprietary Trading:
Industry Trends, Drivers and Policy Implications’, CGFS
Papers No 52.
Cheshire J (2015), ‘Market Making in Bond Markets’,
RBA Bulletin, March, pp 63–73.
Donald S, B Arnold, H Bateman, R Buckley and K Liu
(2014), ‘The Implications of Complexity for Systemic Risk in
the Superannuation System’, CLMR Working Paper No 13-3.
Edwards F (1999), ‘Hedge Funds and the Collapse of
Long‑term Capital Management’, Journal of Economic
Perspectives, 13(2), pp 189–210.
EFAMA (European Fund and Asset Management
Association) (2014), ‘Asset Management in Europe: Facts
and Figures’, 7th Annual Review, June.
Fischer S (2015), ‘Nonbank Financial Intermediation,
Financial Stability, and the Road Forward’, Speech at the
20th Annual Financial Markets Conference ’Central Banking
in the Shadows: Monetary Policy and Financial Stability
Postcrisis’ , Stone Mountain, Georgia, 30 March.
FSB (Financial Stability Board) (2013a), ‘Strengthening
Oversight and Regulation of Shadow Banking: Policy
Framework for Addressing Shadow Banking Risks in
Securities Lending and Repos’, August.
FSB (2013b), ‘Strengthening Oversight and Regulation
of Shadow Banking: Policy Framework for Strengthening
Oversight and Regulation of Shadow Banking Entities’,
August.
FSB (2014), ‘Global Shadow Banking Monitoring Report
2014’, 30 October.
FSB (2015), ‘Meeting of the Financial Stability Board
in Frankfurt on 26 March’, Media Release No 18/2015,
26 March.
FSB and IOSCO (International Organization of
Securities
Commissions)
(2015),
‘Assessment
Methodologies for Identifying Non-Bank Non-Insurer
Global Systemically Important Financial Institutions’,
4 March.
FSOC (Financial Stability Oversight Council) (2014),
‘Notice Seeking Comment on Asset Management Products
and Activities’, December.
IMF (International Monetary Fund) (2015), Global
Financial Stability Report: Navigating Monetary Policy
Challenges and Managing Risks, World Economic and
Financial Surveys, IMF, Washington, DC.
Industry Super Network (2010), ‘Supernomics:
Addressing Failures of Competition in the Superannuation
Market’, ISN Report, March.
IOSCO (2012a), ‘Money Market Fund Systemic Risk Analysis
and Reform Options’, Consultation Report 07/12, April.
IOSCO (2012b), ‘Policy Recommendations for Money
Market Funds’, Final Report 07/12, October.
IOSCO (2012c), ‘Principles on Suspensions of Redemptions
in Collective Investment Schemes’, Final Report 02/12,
January.
IOSCO (2013a), ‘Principles of Liquidity Risk Management
for Collective Investment Schemes’, Final Report 03/13,
March.
IOSCO (2013b), ‘Principles for the Valuation of Collective
Investment Vehicles’, Final Report 05/13, May.
Kosev M and T Williams (2011), ‘Exchange-traded Funds’,
RBA Bulletin, March, pp 51–59.
B U L L E TIN | J U N E Q UA R T E R 2 0 1 5
77
R EC ENT DEV ELOPM E N T S I N A S S E T M A N AG E M E N T
Liu K and B Arnold (2010), ‘Australian Superannuation:
The Outsourcing Landscape’, APRA Working Paper, July.
Lowe P (2015), ‘The Transformation in Maturity
Transformation’, Address to Thomson Reuters’ 3rd
Australian Regulatory Summit, Sydney, 27 May.
OFR (Office of Financial Research) (2013), ‘Asset
Management and Financial Stability’, September.
SEC (US Securities and Exchange Commission) (2014),
‘SEC Adopts Money Market Fund Reform Rules’, Media
Release No 2014-143, 23 July.
78
R ES ERV E BA NK OF AUS T RA L I A
SIFMA (US Securities Industry and Financial Markets
Association) (2014), ‘SIFMA Asset Management Group’s
Comments to the FSB and SEC in Response to OFR Study
and in Regards to Separate Accounts’, Washington, 4 April.
Singh M (2011), ‘Velocity of Pledged Collateral: Analysis
and Implications’, IMF Working Paper No WP/11/256.
The Joint Forum (1999), ‘Intra-Group Transactions and
Exposure Principles’, December.